KHAN YUNIS, Gaza Strip, (AFP/Reuters) - UN chief Ban Ki-moon slammed Israels blockade of the Gaza Strip during a tour of the war-battered coastal territory on Sunday, saying it was causing unacceptable suffering. The visit came as part of a two-day regional tour aimed at reviving Israeli-Palestinian peace talks that last collapsed during Israels war on the territorys Hamas rulers in December 2008 and January 2009. Defiant and rebellious Israeli PM Benjamin Netanyahu, meanwhile, said he had informed Washington in writing that Israel would not stop Jewish settlement in and around Jerusalem. I have repeatedly made it quite clear to Israels leaders that the Israeli policy of closure is not sustainable and that its wrong, Ban told reporters in the southern Gaza Strip town of Khan Yunis. It causes unacceptable suffering, he said, adding that he was saddened to see that teenagers and children were the worst affected. This policy is also counterproductive. It prevents legitimate commerce and encourages smuggling. It undercuts moderates and empowers extremists. It was the UN chiefs second visit to Gaza since the Israeli attack in which some 1,400 Palestinians were killed and thousands of houses were severely damaged or destroyed by the Jewish forces. Thirteen Israelis were killed in the fighting. Ban toured some of the hardest-hit areas of Gaza before announcing projects to build 150 homes, a flour mills and a sewage treatment plant, for which Israel has given rare approval for the import of construction materials. The housing project on the site of a former Israeli settlement near the southern town of Khan Yunis is seen as a way of proving to Israel that the UN can bring building materials into the territory without them being hijacked by some elements. Munir Manneh, the head of construction projects for the UN refugee agency UNRWA, said all the materials would be carefully documented. We will give an excellent example and prove that we will control the process 100 percent, he said after presenting the project details to Ban. Ban hailed the projects but said the sight of houses that remain in ruins more than a year after the war ended was quite distressing and that more reconstruction was needed, calling the projects a drop in the bucket. Ban condemned all forms of violence during his visit, but also told Israels President Shimon Peres that the closures had imposed unacceptable hardships. I understand and share Israels concerns about the challenges posed by Hamas, but Israels blockade continues to impose unacceptable hardships while empowering extremists, he said. I am confident the blockade can be lifted while addressing Israels legitimate security concerns. Israeli Prime Minister Benjamin Netanyahu told his cabinet on Sunday, Our policy on Jerusalem is the same policy followed by all Israeli governments for the 42 years, and it has not changed. As far as we are concerned, building in Jerusalem is the same as building in Tel Aviv.